Palestinians protest high cost of living in Ramallah. Photo by Lazar Simeonov.

Israel has recently released NIS 350 million (around $94 million) of Palestinian tax money for use by the Palestinian Authority.

The release of the money comes after three weeks of escalating tensions and demonstrations in the West Bank, culminating in huge protests following the death by interrogation of the prisoner Arafat Jaradat.

The decision to transfer the money, according to Israeli Prime Minister Benjamin Netanyahu speaking to Channel 10, was taken “so that they [the Palestinian Authority] won’t have an excuse not to enforce calm on the ground.”

Since November, Israel has withheld approximately NIS 1 billion or $270 million worth of Palestinian taxes, including the NIS 350 million, in retaliation to the United Nations move to upgrade Palestine’s status to non-member observer state and the creation of the State of Palestine.

The Palestinian Authority is in the midst of the worst financial crisis in its history, suffering from the triple-effect of having Israel and the US withholding their funds and aid, and Arab League donors not committing themselves to filling the void.

As the NIS 350 million is worth only three weeks of taxes it does little to aid the financial crisis of the Palestinian Authority and is generally considered a politically shrewd move.

As Israel plays the political game with the Palestinian Authority, it simultaneously shot at two young boys in the Aida refugee camp, reintroduced the lethal Ruger rifle for 'crowd-control’ reasons and seriously injured more than 400 Palestinian civilians in the last week of February alone.

By handing over the largely symbolic tax money, Israel positions itself as the peaceful and responsible party. It can also undermine the Palestinian Authority’s arguments for not calming the protests. It can therefore incite more fighting through its increased brutality and allows the international media to swoon over the violent Palestinian backlash.

The Palestinian Authority is in the midst of the worst financial crisis in its history, suffering from the triple-effect of having Israel and the US withholding their funds and aid, and Arab League donors not committing themselves to filling the void

Dr. Mustafa Barghouti, Director General of the Palestine National Initiative proclaims “It is not their money, it is our money. It is done in an effort to create a positive ahead of Obama’s visit, but it is an act of deceit. There is no good intention here.”

A senior aide to Palestinian Authority President Mahmoud Abbas stated that the Authority would not issue any call for calm in the West Bank, despite the money, and blamed Israel for the escalation in unrest.

Israel withholding tax revenues

"The Palestinians can forget about getting even one cent in the coming four months, and in four months' time we will decide how to proceed," former Israeli Foreign Minister Avigdor Lieberman had stated in November.

Despite this statement coming immediately after the successful UN bid for non-state observer status, the Israeli state officially claimed that it was seizing Palestinian tax money because the Authority had not paid the Israeli Electricity Corporation bill of around NIS 750 million.

Either way the transfer freeze has brought the Palestinian economy to its knees, with 150,000 civil servants having their pay suspended or drastically cut, and hundreds of employees taking to the streets to protest the situation. The underhand method of freezing tax transfers forces the Palestinian Authority to submit to Israeli demands in a need to pay its labour force and continue funding initiatives in the Palestinian economy.

The Palestinian Authority generates approximately NIS 550 million every month through taxes. Yet as Israel actually collects two-thirds of this amount, around NIS 350 million, the Palestinian Authority is left with NIS 200 million when Israel decides to withhold the funds.

What’s more, a senior official at the Palestinian Finance Ministry stated that under normal conditions, the Israelis keep NIS 150 million of the NIS 550 million to cover bills from Palestinians being treated in Israeli hospitals, and compensation cases ruled by Israeli courts against Palestinians.

A persistent shortfall in the Arab donor funding, and the continued use of leverage by the Israeli state means that the Palestinian Authority is therefore amassing enormous debts to various banks to cover its costs.

A World Bank report released in September 2012 described a financial gap of almost $400 million. In an interview with the Associated Press, Palestinian Prime Minister Salam Fayyad said the Authority is on the “verge of being completely incapacitated.”

This use of 'leverage’ is largely acknowledged by the rest of the world, and even condemned by the US and Europe. Yet Israel has used it countless times to manipulate certain events. When questioned about the policy it indirectly recognizes its usage, and claims they are reacting to Palestinian unilateral actions, deemed illegal under the Oslo Accords, so it cannot be blamed for acting unilaterally in retaliation.

It is more than likely that Israel will continue to withhold the tax money despite releasing the NIS 350 million collected in December. Aside from becoming an easy bargaining tool for Israel to use, it also bolsters the narrative that the Israeli government is helping the Palestinian Authority when it does release the money.

The bitter paradox is that Israel’s 'puppeteer-ing’ policies have caused the Palestinian Authority’s massive debts and become their main source of stability and financing in one devious move.

There is hope that the renewed pressure on Israel in recent months will force the state to release Palestinian funds. The on-going government forming debacle in the Israeli Knesset is Netanyahu’s highest priority, but the strong possibility that center-left parties would be heavily involved in the government could allow a more favourable atmosphere for Palestinian Authority negotiators. US President Obama’s visit in two weeks, although extremely unlikely to develop into anything remotely resembling a 'peace talk’, could pick up a few political gains for the Authority, perhaps by including the money release.

However, Israel has a history of fighting harder when it has its back up against a wall. It will likely use the tax money as leverage against the international community and Obama, bargaining for more cooperation and less pressure in exchange for releasing the Palestinian money. What’s more, none of the parties in the potential new government showed any real desire to bring up the 'Palestinian-issue’, let alone push to release leverage money, during the January elections.

Any attempt at obtaining the tax money without being coerced into Israel’s control will end up fruitless. Should Fatah and Hamas reconciliation efforts continue, it is hard to see a reason why Israel will want to release more funds, and could use the money to manipulate or impede these efforts.

As the political state lumbers on, the situation on the ground will continue to deteriorate. Everyday Palestinian workers and their families face yet another attack on their livelihood and can do little in the face of the myriad of power that controls their lives.